Giving Newspapers New 'Bidness'

Newspapers, which once thumbed their noses at alternative selling methods, are now willing to try anything when it comes to gaining ad revenue. One company experiencing the benefits: Mediabids, an online marketplace that serves advertisers and agencies along with newspapers and magazines. The Winsted, Conn.-based company takes its cue from online travel sites, with publishers in this case bidding on advertisers' dollars.

"It's not really an auction," Jedd Gould, president and founder of Mediabids, tells E&P. "It's a situation where the advertiser is getting bids or proposals from publications and using that framework to determine which [buys] are right for them."

Mediabids gathers the information from newspapers, including rates, specs, circulation, and demographic information, and presents it to an advertiser in one package. "It's a pretty clean process that saves advertisers a lot of time, versus the conventional process of calling multiple publications and trying to determine the rates and deadline," said Gould during a conference call hosted by Wachovia Equity Research. "There's a whole range of issues that make the conventional method of sales kind of inefficient. So that's been our bedrock."

It's no surprise that it took a while for newspapers to catch on. When the platform first launched in 2002, publishers wouldn't touch it with a 10-foot pole. "A lot of publications felt like we were not a method of selling, that somehow we would detract from their sales efforts," says Gould, who used to run a chain of weeklies in Connecticut. "Our argument is that we are selling ads that your sales reps don't know about yet."

Mediabids now has more than 10,000 advertisers and agencies using the site, and more than 4,000 publications (60% newspapers, 40% magazine). It tends to attract regional advertisers and "thousands of mom-and-pop type businesses," Gould notes. The majority of participating newspapers are small to mid-sized, although Mediabids does include such heavy hitters as The New York Times, The Washington Post, and The Wall Street Journal among its ranks. Gould points out that any newspaper registered on the site can determine its own level of activity and participation. Smaller papers tend to be more aggressive, but they are seeing pick-up with larger metros.

The company makes money by taking 8.5% of all transactions. The average budget tends to be around $9,600. Mediabids' annual revenue is more than $10 million.

Online auctions for advertising are nothing new. Google got in the game, buying newspaper space and having advertisers bid. The Boston Globe introduced a front-page auction for its Sunday recruitment section BostonWorks in May 2005. However, Mediabids flips the model over, making newspapers stand on the block -- a method Gould says is more productive.

Using Google as an example, Gould explained during the conference call, "The feeling is that the perceived value of that space is perhaps even lower than the discounted price that Google paid. Even at 50% off, advertisers don't generally think to themselves, 'That's a great deal.' They are still thinking, 'That's a pretty high price.'"

Indeed, The Boston Globe has quietly stopped pushing its online auctions due to lack of demand, confirms Jason Kissell, managing director of BostonWorks. "We have stopped emphasizing and promoting it," he says, but it is still available.